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(Bloomberg) -- With the Swiss franc headed for the biggest weekly decline in more than two years, the one question that’s dogging traders is: why now?

The currency’s slump seems to have been triggered by a host of factors including an excess of francs in the system, euro buying by Japanese banks triggering stops and Toshiba Corp.’s selling of its stake in Swiss company Landis+Gyr Group AG. Commerzbank AG said the Swiss National Bank could be selling the franc. The central bank declined to comment.

The franc surged 2 percent in the six months through March, spurred by haven buying ahead of French elections. That possibly prompted the Swiss central bank to buy the euro to counter some strength in the franc, resulting in an excess of domestic currency in the system, according to UBS Wealth Management.

“The general trend is driven by the excess supply of Swiss franc,” Thomas Flury, global head of currency strategy at UBS, said in an email response to questions. “The SNB’s interventions before the French elections led to quite a strong increase of Swiss franc money in the system. Risk assessment has fallen drastically since then. It took some time for this money to become visible on the exchange rate, but now it is.”

The franc fell 0.9 percent on Friday to 1.1370 per euro as of 11:08 a.m. in London. It has declined 3 percent this week, set for the biggest drop since the week ended Jan. 30, 2015. The Swiss National Bank removed its 1.20 minimum exchange rate for the euro-franc that month.

Japanese Buying

UBS said there were a series of sell orders triggered when euro-franc started climbing past 1.12. The move might also have been reinforced by “some talk” of initial public offer-related flows, he said. Landis+Gyr Group AG, a Swiss smart energy meter company, made its trading debut late last week after owner Toshiba Corp. sold down its 60 percent stake in the company.

UBS expects the franc to decline to 1.14 in six months and 1.16 in 12 months. However, “in the short term, it is very well possible that the exchange rate spikes well above these levels," Flury said.

For RBC Europe Limited, “the culprit may have been CHF/JPY selling on ongoing merger and acquisition flows," global head of currency strategy Elsa Lignos said.

This week’s drop in the franc was exacerbated by Japanese banks buying euros for their usual daily fixing requirement, inadvertently triggering large buy-stops for the unified currency, according to two Asia-based traders who declined to be identified because they aren’t authorized to speak publicly. They said that poor liquidity accentuated the slide in the franc.

‘Significantly Overvalued’

The franc is “significantly overvalued”, Swiss National Bank President Thomas Jordan said in comments to Le Temps that were published this week. “For this reason we maintain our monetary policy of negative interest rates and interventions if needed,” the newspaper cited him as saying.

“A divergence between the monetary policies of the SNB and the ECB is apparently the only opportunity for the SNB to get closer to its almost unobtainable target of a weaker franc," strategists at Commerzbank including Antje Praefcke said in a note to clients.

“The SNB may have seized the opportunity and intervened in a thin, risk-positive market into an upmove so as to drive up EUR/CHF at a low cost, as the SNB is still of the view that the franc is overvalued," they wrote. “As long as the euro remains in an uptrend thanks to speculation about a normalization of monetary policy in the euro zone the SNB can sit back and relax.”

Swiss National Bank spokeswoman Silvia Oppliger declined to comment when contacted on Friday.

--With assistance from Michael G. Wilson and Catherine Bosley

To contact the reporter on this story: Stefania Spezzati in London at sspezzati@bloomberg.net.

To contact the editors responsible for this story: Jenny Paris at jparis20@bloomberg.net, Ven Ram, Neil Chatterjee

©2017 Bloomberg L.P.

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